Open Source Overview

Open Source Overview

Open source software development is relevant to investment research because it reduces the research and development expense of the publicly traded companies that make use of it. Much use of open source involves burying a component or software artefact deep into an otherwise closed-source software product or service (being careful that the open source license permits that use). For example, some version of the Apache HTTP web server is a component of most leading closed-source application servers. Alternatively many publicly traded software publishers and service providers redistribute a discrete piece of open source software instead of developing their own software for that function. Both approaches save the public software or services company from reverse engineering or otherwise creating from scratch a particular commodity function, or licensing the software from a closed-source software publisher.

Otherwise the development aspect of open source is not especially relevant to investment research. For development, open source software in theory relies on a community of independent contributors, some of whom are volunteers and some of whom are employed by technology companies. In reality, most popular open source software is written by employees of the commercial entity most assoicated with it (e.g., Fedora Linux with Red Hat, Geronimo application server with IBM, LogicBlaze message-oriented middleware with Iona/Progress). There are exceptions (e.g., Drupal content management software and Acquia) but the tendency is to merge the project with the company as the company matures.

There are a variety of open source software foundations that are more independent than the norm from the companies that use their project code for revenue generation. However even these foundations are heavily funded by technology companies (e.g., Apache Software Foundation by all the major market participants including Microsoft, Mozilla by Google, the Linux Foundation by IBM and HP, and so forth)

Any individual can contribute any code in any area they prefer, though there is generally a pyramid management structure that ensures that aspects of the software are developed in a rational fashion and determines which code/modules are eventually included in future versions of the software.
New versions are typically released much more frequently than closed-source software. With a large body of developers and a frequently updated product, open source software has been championed as a way to build better quality software faster and at a lower cost. This also is theory.